John Taylor, Hedge Fund Manager, Explains Why European Banks' Balance Sheets Are Keeping The Euro High

Taylor explained why he thinks the Euro should be much lower than it is now, with dollar parity not an outlandish target, and why capital raises by European banks are supporting it in the short term:

"I think there's a distinct possibility [that the euro will drop to parity with the dollar]."

"All the European banks have to raise capital. This is very difficult for them. So instead of raising the capital in order to increase their capital ratios, they're bringing back assets that were overseas, into Europe."

He also discusses his views on the dollar, European currencies outside the Euro and why he is long Australia and short New Zealand.

"If [US tax benefits are not extended], that will put the U.S. into a recession, which is again one of these perverse things that will strengthen the dollar."

"The Norwegian krone is one of the best currencies because they have all the oil...[The krone] a strong currency, a stable currency."

"I am long the Australian dollar, and short New Zealand...a lot of money is coming into Australia to develop the mineral sector. Capital inflow into Australia is very strong...New Zealand doesn't have that capital inflow..."